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Treasury Yields, Copper Rise as S&P 500 Reaches Record

By Joseph Ciolli and Callie Bost
June 02, 2014 4:11 PM EDT 6 Comments

Treasuries slid while copper rose as Chinese manufacturing grew at the fastest pace in five months. The Standard & Poor’s 500 Index advanced to close at a record for a third straight day.

Treasury 10-year note yields added five basis points to 2.53 percent. The S&P 500 rose 0.1 percent to 1,924.97 at 4 p.m. in New York, after losing 0.4 percent earlier. The Nasdaq Composite Index slipped 0.1 percent. Copper climbed 1.4 percent. The euro traded at almost the lowest level in three months against the dollar as data showed slower German inflation.

China’s factory growth added to evidence that government measures to counter the slowdown in the world’s second-biggest economy are gaining traction. U.S. stocks reversed early losses as the Institute for Supply Management corrected its May manufacturing index to show factory growth improved. Data later this week include reports on U.S. factory orders, as well as the Bureau of Labor Statistics’ monthly payrolls report on June 6.

“The adjustment was probably good enough to keep intact the slow grinding higher, but data later this week from the ECB and BLS will trump all other releases,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview.

The ISM originally said the gauge fell to 53.2 before later correcting it twice, once to 56 and a second time to 55.4. Economists in a Bloomberg survey had forecast a reading of 55.5.

ECB Watch

Investors will also be looking to Europe as Mario Draghi confronts the threat of deflation, preparing to unleash an array of measures to jolt the economy and ignite prices. From negative interest rates to conditional liquidity for banks, the European Central Bank president and his colleagues have signaled all options are up for discussion when they meet on June 5.

Of 50 economists surveyed by Bloomberg News, 44 expect the ECB to become the first major central bank to take interest rates negative by cutting its deposit rate. All but 2 of 58 respondents said the benchmark rate would also be reduced.

The Bureau of Labor Statistics will report U.S. employment data on June 6, with economists in a survey predicting a gain of 215,000 jobs in May and an increase in the unemployment rate to 6.4 percent from 6.3 percent.

Among stocks moving in the U.S., Broadcom Corp. rose 9.3 percent after saying it will explore options for its cellular baseband business. Caterpillar Inc., Home Depot Inc. and United Technology Corp. rose at least 0.8 percent to lead gains in the Dow Jones Industrial Average, while Visa Inc. and Exxon Mobil Corp. dropped 0.6 percent for the biggest losses. Trading volume in S&P 500 stocks was 22 percent below the 30-day average.

Rebound

The S&P 500 has rebounded 6 percent since a selloff in small-cap and Internet shares spread to the broader market and dragged the gauge to a two-month low in April. The measure trades at 16.3 times the projected earnings of its members, up from 14.8 times four months ago.

The Stoxx Europe 600 Index advanced 0.2 percent after a seventh consecutive weekly gain, the longest streak since August 2012. The gauge increased 1.9 percent in May, a second monthly advance.

Det Norske Oljeselskap ASA rallied 9.1 percent after agreeing to buy Marathon Oil Corp.’s Norwegian business for $2.7 billion. Orion Oyj jumped 15 percent after saying it will develop a cancer treatment with Bayer AG. Air France-KLM Group (AF) added 2.5 percent after a report that the airline will start a 1 billion-euro cost-cutting program in 2015.

Alcatel-Lucent SA dropped 2.9 percent after the French network-equipment maker said it is offering 1 billion euros in bonds that can be exchanged for stock.

Commodities

Copper futures for delivery in July gained 1.4 percent to $3.1665 a pound in New York. China is the biggest energy consumer and largest buyer of industrial metals. Zinc and lead also climbed more than 1.3 percent, while coffee, sugar and wheat lost at least 1 percent to pull the S&P GSCI Index of commodities lower.

China’s Purchasing Managers’ Index rose to 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing, compared with the 50.7 median estimate of analysts surveyed by Bloomberg News. April’s reading was 50.4, with numbers above 50 indicating expansion.

The MSCI All-Country World Index of stocks rose less than 0.1 percent following last month’s 1.8 percent increase. The MSCI AC Asia Pacific Index (MXAP) gained 3.2 percent last month, the most since September. Equity markets in China, Hong Kong and New Zealand were closed today for holidays. The value of global shares rose to a record $64 trillion last week.

Dollar, Aussie

The U.S. dollar gained 0.3 percent to $1.3598 per euro after appreciating to $1.3586 on May 29, the strongest since Feb. 13. Manufacturing in the euro area slowed amid weakness in France, adding to evidence of the region’s uneven recovery.

Australia’s dollar weakened after RPData-Rismark data showed median home prices for the nation’s biggest cities dropped 1.9 percent in May, the biggest decline since the 2008 financial crisis. Building approvals slid 5.6 percent in April, the statistics bureau said. The Aussie fell 0.7 percent to 92.47 U.S. cents, the biggest drop in almost two weeks.

Ireland’s 10-year bond yield reached a record low of 2.56 percent. Portugal’s bonds slid after its Constitutional Court ruled that austerity measures including further wage cuts for state workers violated equality principles. The yield on Portuguese 10-year bonds increased four basis points to 3.67 percent.

Russia’s Micex Index (INDEXCF) jumped 2.3 percent. Ukraine made its first payment in months to OAO Gazprom and the nation is set to resume talks with Russia on a deal to keep natural gas flowing between the countries. Gazprom climbed 1.7 percent. The Ukrainian Equities Index (UX) advanced 1.1 percent.

The S&P BSE Sensex rose 1.9 percent, the biggest gain since May 12. India’s Purchasing Managers’ Index climbed to 51.4 in May, the highest reading since February, data released by HSBC Holdings Plc and Markit Economics showed.

Thailand’s SET Index (SET) advanced 1.8 percent for its highest close since October. The junta will accelerate spending on infrastructure and promote investment along its borders, Chief Marshal Prajin Juntong, the head of economic affairs, told reporters yesterday.

To contact the reporters on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; Callie Bost in New York at cbost2@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Michael P. Regan

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